Anticipating Litigation before a Lawsuit is Filed

The duty to preserve evidence is a common law duty owed to the court by all litigants. It is triggered when a "reasonable person" anticipates litigation. While the filing of a lawsuit presents a clear example of when a reasonable person would anticipate litigation, what if a lawsuit has been threatened but has yet to be filed? What if a demand for relief is made but no threat of litigation is included? What does an employer do when an employee is terminated for cause, and the employee protests, saying "I'll see you in Court"? Which of these scenarios, if any, would cause a reasonable person to anticipate litigation? North Carolina courts acknowledge that the "reasonable anticipation of litigation" standard is not a bright-line test, but neither the legislature nor the courts have endeavored to provide a more specific test or framework for North Carolina litigants to follow in order to avoid spoliation of evidence.

While determining when litigation is reasonably anticipated can be challenging, there are certain instances outside of the filing of a lawsuit where any reasonable person would, or should, anticipate that a lawsuit will follow. For example, certain triggering events like a significant accident or injury, and the documents that flow from them, are outside of regular business practices and likely to meet the threshold of "reasonable anticipation of litigation. " When an employee is terminated or a dispute arises over the terms of a contract, however, the threshold is not as readily met, which means the circumstances must be monitored carefully until either the threshold is met or the threat of litigation has passed.

One situation where the duty to preserve clearly is triggered is when a litigant or potential litigant consults with an attorney, and the attorney later claims that certain documents arising from those early consultations are protected by the work product doctrine. By definition, the work product protection attaches only to documents related to litigation preparation. Accordingly, both attorneys and their clients should be aware that, if work product protection is being asserted, the duty to preserve has attached, and documents related to the impending litigation should not be destroyed.

Organizations would be wise to consider the implementation of a "decision tree" or "factor analysis" that (1) identifies potential triggering events (based on the organization's litigation profile) and (2) documents the factors the organization will consider before (3) concluding whether its duty to preserve has been triggered. For example, if an enterprise has regular turnover of personnel, then termination, by itself, whether voluntary or involuntary, likely does not constitute a triggering event. However, if an employee makes specific complaints of harassment or discrimination and then is terminated, that may cause the organization to preserve his or her personnel file and other pertinent information for some time beyond the normal retention period, and if the organization subsequently receives an EEOC claim, then it definitely should preserve all pertinent information. By setting forth criteria for retention or preservation of records and documenting its decision-making process when confronted with a potential triggering event, an organization is better able to defend itself in the event it destroys information later deemed relevant to a dispute.

With the recent changes to the North Carolina rules governing the discovery of electronically stored information, it is likely there will be more disputes over preservation and/or spoliation and that litigants will continue to seek brighter lines as to when the duty to preserve is triggered. Until the courts respond, potential litigants and their attorneys must be mindful of issues such as contract or employment disputes that could progress quickly to the stage where a reasonable person would anticipate litigation, thus triggering the duty to preserve, at which time they must act quickly and decisively. In addition, organizations should consider implementing enterprise-wide information governance protocols to ensure that the entity is able to preserve pertinent information for business or litigation purposes and to dispose of irrelevant information in an orderly and timely fashion.

Monica McCarroll is a partner with Williams Mullen. Monica focuses her practice on commercial litigation, with an emphasis in e-Discovery issues. She can be reached at mmccarroll@williamsmullen.com.